The U.S. Tobacco Buyout: A Partial and General Equilibrium Analysis

This article analyzes the impact of removing the U.S. tobacco program in both a partial and
general welfare economics framework. In a partial-equilibrium framework, a consumer taxfunded
quota buyout can result in producer gains, consumer losses, net losses resulting from
higher prices, and deadweight losses. In a general-equilibrium framework, society can gain from
the buyout resulting from considerable potential savings from reduced healthcare costs attributable
to a reduction in smoking. Additionally, we present a model that addresses the addictive
qualities of tobacco while considering the effects of the quota buyout. We also conclude that
another possible effect of the buyout is an increase in worker productivity because employees
who are able to quit smoking reduce the amount of smoking-related sick days taken.